Herbert Simon, the winner of the Nobel Prize in Economics in 1978 for his pioneering work on “the decision-making process within the economic organisation”, was born on 15 June 1916 in Milwaukee, Wisconsin, USA. He described himself as an “arrogant” individual, not inclined to accept criticism and a “workaholic”. His childhood and adolescence were spent in an environment of intellectuals with a passion for music and reading.
His intellectual tastes influenced him towards the exact sciences, and it was thanks to his uncle, Harold Merker, that he was introduced to the social sciences, especially economics. He entered the University of Chicago, where he studied Social Sciences, studies that he complemented with a physics course to broaden his mathematical knowledge. At this time, his main mentor was Henry Shultz. Later, he also received an honorary doctorate in law from Harvard University.
He was hired as a research assistant in 1939. He remained there until 1942 at UC Berkeley due to his dissertation on the decision-making process in organisations, which he submitted at the end of his studies. From there, he passed his doctoral exams by correspondence with Chicago.
He accepted a position at the Illinois Institute of Technology, a significant event in Herbert Simon‘s life since the city was home to the Cowles Commission for Research in Economics, whose directors were Marschak and Koopmans (Nobel Laureates in Economics in 1975). Its research students included Arrow (Nobel Prize in Economics in 1972), Hurwicz, Klein (Nobel Prize in Economics in 1980) and Patinkin. In addition, Oscar Lange, Milton Friedman (Nobel Prize in Economics in 1976) and Franco Modigliani (Nobel Prize in Economics in 1985) were frequent participants in the Commission’s seminars. Simon became a regular participant in all the meetings, which was like a second training in economics.
Works of Herbert Simon
This American social scientist is known for his contributions in various fields such as psychology, mathematics, statistics and operations research. He synthesised into a key theory that won him the Nobel Prize in Economics in 1978. He also won, together with Allen Newell (his collaborator), the 1975 AM Turing Award, the highest honour in computer science for their contributions to artificial intelligence, the psychology of human cognition and list processing.
Established economic theories held that firms and entrepreneurs acted completely rationally, maximising their own profits as their sole objective.
In contrast, Simon argued that in making decisions, all people deviate from the strictly rational and described firms as adaptive systems, with physical, personal and social components. Through these perspectives, he wrote about decision-making processes in modern society in a completely new way.
He is best known for his work on the theory of corporate decision-making known as behaviourism. Simon sought to replace the highly simplified classical approach to economic modelling based on a concept of profit-maximising entrepreneurship and decision-making with an approach that recognises multiple factors that contribute to decision-making in his book Management Behaviour 1947.